AT&T (NYSE: T) is at it again.
Four years after it purchased Cingular, the company is now trying to acquire T-Mobile USA from Deutsche Telekom (PINK: DTLSF).
The price tag? A massive $39 billion – the largest planned merger of the year. The purchase includes $25 billion in cash, with the rest made up of AT&T stock.
It would also give AT&T 129.2 million subscribers, leapfrogging over current market leader Verizon (NYSE: VZ), which has 101.1 million customers. And in becoming America’s largest mobile network, AT&T would also boast a 43% share of the market.
And there’s the rub: A 43% market share obviously has antitrust regulators and politicians in a major flap.
Regulators to AT&T: We Don’t Like Your “Terminator” Business Model
When you get a proposed deal of this size, it’s bound to trigger the words “monopoly” and “antitrust.” And AT&T’s plans have done just that…
- Senator John Rockefeller, chairman of the Commerce Committee expressed his hope that the Department of Justice and the FCC “leave no stone unturned in determining what the impact of this combination is on the American people.”
- Senator Herb Kohl, chairman of the Senate Antitrust, Competition Policy and Consumer Rights Subcommittee promised: “The Antitrust Subcommittee will take a close look at what this loss of competition will mean for people who increasingly rely on wireless phone service to connect to friends, family and the Internet.”
- And Bert Foer, president of the American Antitrust Institute, said: “AT&T was broken up and now it’s back with a vengeance… We have to decide if we’re happy with the idea of going back to monopolistic treatment of the telecom industry. AT&T has come back to monopolistic power just like the Terminator.”
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So what’s our verdict on the deal?
Competition, Not Consolidation
The biggest issue here comes down to choice.
According to AT&T, the expanded network coverage should be a win-win for consumers. In other words, what’s good for AT&T should be good for everyone.
Obviously, that’s nonsense.
The bottom line is simple: Maintaining viable options fuels competition between carriers and phone manufacturers alike. And the carrier that offers the most competitive pricing and attractive phones will win in the end. But without T-Mobile, the biggest loser here is ultimately the American consumer.
We’re not the only ones who think so.
As GigaOM puts it, “With the merger of AT&T and T-Mobile, the market is now reduced to three national players: AT&T, Verizon and Sprint. Net-net, U.S. consumers are going to lose.”
And the unlikely winner here?
Competitive Data Plans Could Push this Underdog to the Top
Once AT&T gobbles up T-Mobile’s data packages, Sprint’s (NYSE: S) unlimited plans will offer the most competitive pricing around. (Consider that comparable plans on Verizon go for $40 or more).
Plus, Sprint is the only carrier that has fully integrated Google’s customizable dialer application – Google Voice – into its phones. The move has certainly turned some heads and inspired Gizmodo to dub Sprint “the official Google carrier.”
Not a bad title for this underdog to hold right now. And as the T-Mobile-AT&T situation unfolds, Sprint could quickly become the clear choice for consumers and investors alike.